The Hamilton Spectator

‘They almost built a statue, you know?’

Councillor­s in Hamilton’s old city wards get a special tax fund to spend on infrastruc­ture – but how it’s been used has come under fire. And with the recent redrawing of ward boundaries, get ready for an ‘awkward’ conversati­on about who will be getting wh

- MATTHEW VAN DONGEN The Hamilton Spectator

a political slush fund. Others call it a valuable weapon in the battle against ravaged roads and sidewalks in the old city of Hamilton.

In Wards 1 and 2, it is celebrated as a rare example of direct democracy.

The area rating special capital reinvestme­nt reserve has a boring official name, but a colourful history.

The pot of cash was created to fund old city infrastruc­ture repairs, but has famously — or infamously — been used for everything from the expropriat­ion of a crime-ridden hotel to funding for school breakfast programs to the repair of a privately owned theatre.

It nearly paid for a $200,000 statue to controvers­ial punk rock hero Frankie Venom before public outrage squashed the idea.

Area rating infrastruc­ture spending spurs regular public debate because each old city councillor has wide latitude in how to use nearly $1.7 million per year. That includes total discretion over a littleknow­n $100,000 budget The Spectator reported on Saturday.

But a new debate looms over the fate of the infrastruc­ture kitty thanks to growing public scrutiny, the upcoming fall election and dramatic ward boundary changes that affect where the contentiou­s cash can be legally spent.

What is the area rating fund?

was created in 2011 out of a council compromise meant to even out tax rates across the evolving post-amalgamati­on city.

The short summary of a long debate: Suburban wards started paying more taxes for some services, but Wards 1 through 8 were not given a correspond­ing tax cut. Instead, the extra taxpayer cash goes into an annual reserve dedicated exclusivel­y to infrastruc­ture within the old City of Hamilton.

Right now, that adds up to $13.4 million a year, with each councillor able to spend up to $1.7 million annually. Since 2011, they’ve spent a combined $68 million.

Large-scale discretion­ary spending by elected city officials has to be “handled carefully to avoid the perception of conflict of interest,” said Richard Leblanc, a York University associate professor specializi­ng in governance and ethics.

“You want to be transparen­t and to have strong back-end accountabi­lity,” said Leblanc, who told The Spectator he would ask for periodic internal audits of discretion­ary spending if he lived in Hamilton.

Discretion­ary councillor spending is not unheard of in other cities.

Until recently, councillor­s in Sudbury controlled spending of up to $50,000 per ward meant for infrastruc­ture and com-

munity grants. But council returned control over the cash to bureaucrat­s in 2016 following public criticism and an auditor general’s review.

Some critics have also complained about the amount of control wielded by Toronto city councillor­s over cash collected via Section 37 “community benefits” agreements with developers whose projects don’t meet zoning rules.

In Hamilton, council must publicly vote on virtually all proposed area rating spending — but it is almost unheard of for councillor­s to vote against each others’ ward projects.

Most councillor­s choose funded projects themselves with varying levels of consultati­on with city staff and residents. In Wards 1 and 2, however, residents get to vote on the projects via a unique “participat­ory budget” process.

The amount spent in any one ward can vary dramatical­ly, in part because councillor­s sometimes bank infrastruc­ture cash for special projects like buying a closing school property, for example.

For example, the latest reserve data show Ward 4 Coun. Sam Merulla has spent $10.2 million over seven years — while councillor­s in Ward 7, previously Scott Duvall and now Donna Skelly, have spent a combined $5.6 million in approved projects.

Ahead of the fall election, some local residents are calling for an end to the largely councillor-directed spending — or at least a crackdown on a famously broad definition of “infrastruc­ture.”

“Councillor­s should not be deciding on a whim where to spend this money,” argued resident and council critic Gabriel Nicholson in a recent letter to council.

Nicholson — who has also asked in the past for a program audit — argued spending on consultant­s, charitable grants, school-owned playground­s and a theatre facade fall outside the stated infrastruc­ture priority of the special tax levy.

“We need to address a growing ($3 billion) infrastruc­ture deficit that will never end. It’s time to end this program until an alternativ­e can be devised.”

But councillor­s say the special levy is doing its job. In 2017, for example, close to $9 million in area rating cash was approved for roads, sidewalks and related repairs, with hundreds of thousands more going to park and facility projects.

A majority of residentia­l street “shave-and-paves” on the Mountain or in the lower city are funded through area rating cash, added engineerin­g director Gary Moore.

But it is also true that hundreds of thousands of dollars, if not millions, have been spent on projects that stretch the definition of public infrastruc­ture repair.

Brian McHattie, former Ward 1 councillor, is often credited with first using the term “social infrastruc­ture” to justify the use of area rating cash for laudable but less-than-concrete projects like breakfast programs, for example.

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